Yen Weakness Over the Past Year Has Been a Net Drag on Japan’s Economy, Economist Says

A Daiwa Institute of Research economist said yen weakness over the past year has been a net drag on Japan’s economy. According to Jin10, economist Keiji Kanda said that for the past year, every 10% depreciation of the yen against the U.S. dollar has reduced Japan’s real GDP growth by about 0.14 percentage points on a net basis. Kanda said a weaker yen typically supports growth through inbound consumption and a stock-wealth effect, but those benefits are concentrated among tourism-related companies and older households with large asset holdings. He said rising import costs have instead become a heavy burden for most companies and households, while factors including price pass-through, tensions in the Middle East, U.S. President Donald Trump’s tariffs, and a decline in the number of Chinese tourists have restrained the usual positive effects of yen weakness. Kanda added that the yen remains near historical lows against the U.S. dollar, hovering around 162.20.